Bullet train suffers two big setbacks that could be fatal

Late Wednesday, the California High-Speed Rail Authority dispatched a report to the Legislature, crowing about progress in building a statewide bullet train system.

It boasted of spending $2.3 billion so far on an initial 119-mile segment in the San Joaquin Valley “that will bring passenger rail service to connect the Central Valley to the Silicon Valley by 2025.”

The report implies that the bullet train, a high priority legacy project for Gov. Jerry Brown, is on a fast track to completion.

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However, the financially challenged project had just suffered two immense hits, either of which could be fatal.

Just hours before the report was issued, results of the state’s latest cap-and-trade auction of greenhouse gas emission allowances – the only source of ongoing bullet train funds – were released and once again it produced almost no money.

Moreover, the report was aired just days after the Trump administration had put an indefinite hold on a $647 million grant for electrifying the Caltrain commuter rail service on the San Francisco Peninsula, a major component of the “blended” bullet train system.

Republican congressmen opposed to the bullet train had attacked the grant, knowing that without it, the $2 billon electrification project could die, and along with it, the larger system.

The $2.3 billion that the bullet train report boasts of spending is virtually all federal money, part of a $3.48 billion grant by the Obama administration for the $7.8 billion San Joaquin Valley segment. The state was supposed to match the federal grant but has not put up its share yet thanks to a waiver, but sooner or later will be on the hook.

A $9.95 billion bond issue that voters approved nine years ago was on hold for years because of lawsuits, and project managers have searched, so far in vain, for other sources of money for the $64 billion project.

In desperation, Brown and the Legislature gave the project 25 percent of cap-and-trade auction proceeds, and officials have been weighing a construction loan secured by auction money. However, recent auctions have generated very scant returns, and without a reliable revenue stream, securing a loan would be impossible.

The plunge in auction interest has been attributed to a glut of state-issued allowances and uncertainty about the program’s legality and future. Brown wants the Legislature to reauthorize it beyond the current 2020 expiration date, but so far has been unable to muster enough votes.

Brown is also trying to revive the $647 million Caltrain grant, calling it “an open-and-shut case for infrastructure.”

He and other advocates don’t mention Caltrain’s bullet train connection, but the state is offering $700 million in bullet train funds for electrification (which a lawsuit contends is illegal) and this week’s report says it’s “laying the foundation for high-speed rail service.”

Given the implacable opposition of such heavyweight figures as House Majority Leader Kevin McCarthy of Bakersfield, electrifying Caltrain could require decoupling it from the bullet train – and that could doom Brown’s pet project.